£1,400 raid on family income

FAMILIES stand to lose up to £1,400 in a double-whammy of tax rises and austerity measures, experts warn.

Families stand to lose up to £1,400 as a double-whammy of tax rises and austerity measures hit

The grim predictions for the finances of middle Britain show parents will “bear the brunt” of high inflation, rising bills and salary squeezes.

Austerity measures such as rises in National Insurance contributions and VAT as well as tougher means-testing for tax credits will also squeeze families, say the Institute for Fiscal Studies and the Family and Parenting Institute in a joint report.

They believe families could even be discouraged from going to work because they would earn more relying on benefits.

Dr Katherine Rake, chief executive of the charity FPI, said: “Families are shouldering the burden of austerity. Having children has always been expensive.

"Now many with children face an extra penalty of more than £1,000. It is particularly surprising to see some of the most vulnerable groups – such as families with new babies – are bearing the brunt of the tax and benefit reforms.

Families are shouldering the burden of austerity. Having children has always been expensive

Dr Katherine Rake, chief executive of the charity FPI

“Many families will be struggling to understand why
they have been singled out and how this sits alongside the Government’s
ambition for the UK to become a family friendly nation.”

The median income of £32,500 for families with
children is forecast to drop 4.2 per cent by 2015 – a fall of £1,250.
This is higher than the average overall loss for households of 0.9 per
cent.

Parents of children under five will lose almost £1,400 from a joint income of £29,000 (4.9 per cent).

The
study, the first to reveal the prospects for different family types up
to 2015, found that larger families will suffer a disproportionate
burden.

A typical household with three children
will see income fall by 6.8 per cent by 2015-16, In a home with one
child it will fall by 3.3 per cent. Half a million more children will
fall into poverty by 2015-16. As many as 300,000 will be from homes
where the youngest child is under five.

Anastasia
de Waal, of the charity Family Lives, said: “Tax and benefit changes
which put strain on budgets will ultimately cost the Government more, as
relationships break down, parenting quality is impaired and children’s
outcomes suffer.”

The study also examined the impact of planned tax and benefit changes.

It
said families will lose more than pensioners or adults without children
– before and after the introduction of a single Universal Credit. It
will replace benefits such as jobseeker’s allowance, income support and
housing benefit from October 2013.

Before taking
universal credit into account, the UK’s poorest families will be 10
per cent worse off in 2014–15 than they would have been had no changes
been made to taxes and benefits.

A Government
spokesman said: “Families are facing difficult times so the Government
has taken practical steps – cutting fuel duty, freezing council tax and
cutting income tax for millions.”

Working-age
benefits will go up by 5.2 per cent in April and the child element of
the child tax credit is rising in line with inflation. He added:
“Universal credit will see nearly three million households with a higher
level of entitlement than present.”